Helping to tighten the market a little was the recent one week municipal power failure at South Africa’s Richards Bay Coal Terminal (RBCT) which has resulted in a backlog of seven weeks with 28 vessels now swinging on the hook. The terminal has a nominal export capacity of 90 million tons/year over 5 berths. However, overall the Baltic Dry Index was steady this week and closed on Thursday on 1097 points compared to 1092 points last week and 1127 points the week previously.

The Baltic Dry Index continued to slide this week closing on Thursday at 1127 points compared to 1271 points last week and 1398.

Capesize

Panamax

Supramax

Index

1527

1347

1018

Last Week

1775

1468

1121

Spot time charter

$ 8,400/day

$10,700/day

$10,600/day

One week Ago

$11,100/day

$11,700/day

$11,700/day

Containers: Members of the Transpacific Stabilization Agreement (TSA) are planning a two phase effort to raise Transpacific eastbound rates beginning on March 15 with $300 per FEU following by a further increase on May 1. This follows the January 15 GRI of $300 per FEU. Rates are currently at $4-4,500 per FEU.

General weakness across the board saw the Baltic Dry Index close with a whimper again on Thursday at 1271 points compared to 1398 points last week and 1706.

Capesize

Panamax

Supramax

Index

1775

1468

1121

Last Week

1929

1570

1175

Spot time charter

$11,100/day

$11,700/day

$11,700/day

One week Ago

$14,100/day

$12,500/day

$12,300/day

Tankers: VLCCs trading from the Arabian Gulf to Asia are now making around $60,000/day which their highest level for about three and a half years.

Containers: Compania Sud Americana de Vapores (CSAV) which is controlled by Chile’s Luksic family has this week signed a non-binding memorandum of understanding with Hapag-Lloyd to combine container operations and form the world’s fourth largest container shipping company. If finalized, the merger is estimated to generate savings of around $406 million per year according to CSAV which would become a 30% shareholder in the new enterprise. The next step in the process is to conduct due diligence which assuming no hitches will be followed by a binding contract. The merger agreement does not apply to the solid bulk, liquid bulk, non-containerized reefer and car carrier businesses of CSAV. Interestingly, CSAV’s shares slumped by 12% following the announcement.

Meanwhile, Israel Corp has announced a proposed capital and debt restructuring plan to rescue Zim Line under which creditors and ship owners receive shares totalling 68% of Zim’s issued capital, effectively reducing Israel Corp’s near-100% stake to 32%. Israel Corp would also invest $200m in Zim and waive deferred debt totalling $225m owed by the carrier to its parent.

Despite a mini-recovery in mid week, the Baltic Dry Index closed well down again for the week closing on Thursday at 1398 points compared to 1706 points last week and 2134 points pre-Christmas.

Capesize

Panamax

Supramax

Index

1929

1570

1175

Last Week

2500

1645

1188

Spot time charter

$14,100/day

$12,500/day

$12,300/day

One week Ago

$24,100/day

$13,100/day

$12,400/day

Tankers: An increase in the disposal of VLCCs has taken scrapping in that sector to a 10 year high. The youngest to be scrapped was the 281,000-dwt Diamond Jasmine, which was just 14 years old. At the same time, Chinese imports of crude oil hit a record 6.33m barrels per day in December.

Containers:The Drewry benchmark rate for shipping from Hong Kong to Los Angeles surged by 10% this week to reach just over $2,000 per FEU, the highest level since early September 2013. Despite the increase, the current rate is still down 17% year on year.

Following a record of $68.5 billion in new orders in 2007 at the height of the shipping bubble, South Korea’s top three shipbuilders have reported combined orders totaling $52bn for 2013. This is one of the surest indicators yet that recent market improvements may be short lived if the rush to order at bargain basement prices continues. Out of interest, the world fleet is currently valued at a breath taking $659.6 billion.

Vale SA, the Brazilian iron ore mining company declared force majeure over the holidays on a number of its iron ore sales contracts as poor weather conditions caused floods and landslides affecting iron ore transport through the state of Espírito Santo. The declaration lasted for 12 days during which parts of the rail link from the iron ore mines to Tubarão port were partially or completely shut down. Vale estimated that the impact on iron ore shipments was in the range of 2.5 million tons and was certainly enough to put a dent into the Capesize market.

The Baltic Dry Index closed well down on Thursday at 1706 points compared to its relatively cheerful pre-Christmas level of 2134.

Capesize

Panamax

Supramax

Index

2500

1645

1188

Pre-Christmas

3596

1883

1499

Spot time charter

$24,100/day

$13,100/day

$12,400/day

One week Ago

$32,800/day

$15,000/day

$15,700/day

The charge of activity in bulk markets likely reflects covering off year end positions before it’s too late but in any event the Baltic Dry Index had another good week closing on Thursday on 2337 points compared to 2145 points last week and 1719 points the week previously.

Tankers:

The success of the Belgian VLCC owner/operator Euronav in purchasing the Maersk VLCC fleet is a sure sign of market confidence with a 20% increase in Euronav’s share price this week. However, it was quite an expensive Christmas gift as the purchase price for the modern fleet of 15 vessels was $980 million. As with drybulk, VLCC rates are suffering a post-Christmas lull and this week have been falling like the proverbial lead balloon. Rates are down to $15-20,000/day for voyages from the Arabian Gulf to Asia which is about half of where they were at the beginning of the week.

Containers: Rates from Asia to Europe have started the year at their highest level for more than 17 months in the run up to the Chinese new year at the end of January. Maersk, Zim, CMA CGM, OOCL and Hapag-Lloyd were all to apply rate increases of $250-$500 per TEU this week but whether these can survive the now traditional “slow February” remains to be seen.

The charge of activity in bulk markets likely reflects covering off year end positions before it’s too late but in any event the Baltic Dry Index had another good week closing on Thursday on 2337 points compared to 2145 points last week and 1719 points the week previously.

Containers: The US Federal Maritime Commission (FMC) has pushed back a decision on whether to approve the P3 Alliance, effectively delaying the effectiveness of the proposed agreement. It has asked Maersk, CMA CGM and MSC for "additional information" on the vessel-sharing agreement which was first announced in June this year. After the parties have submitted the requested information, a new 45-day regulatory review period will begin and will include a 15-day public comment period for interested parties.

Tankers: VLCC deliveries are down this year with around 30 new vessels expected to enter the market compared to 49 new entrants in 2012 and 62 in 2011. Against this, the International Energy Agency in its latest report has revised upwards its 2013 oil demand estimate by 130,000 barrels per day to 91.2m bpd and a further 1.2m bpd to reach 92.4m bpd in 2014. At the same time, average VLCC sailing distances are up a healthy 9% since 2010. However, and despite continued market fragility, the VLCC market seems as attractive to speculators as ever with 27 orders for new builds already placed this year compared to only 15 last year. By way of at least some capacity mitigation, it is estimated that some 85 VLCCs, or 13% of the fleet, are approaching their third (and very expensive) special survey with many likely to be scrapped.

Also of significance this week, BP SHIPPING has ordered 14 medium range product tankers with Hyundai Mipo Dockyard. Nine of the vessels are expected to be in the 50,000 tons DWT range, the balance being 40,000 DWT vessels with deliveries spread over 2016/17.

The Chamber of Shipping represents vessel owners, operators and shipping agencies engaged in international trade through Canada’s Pacific gateway. The association fosters the development of collaborative solutions and promotes the development of effective and responsive legislation that continues to support a robust and sound shipping industry.